Affordable Housing’s Pull Cord Problem and the Unintended Insurance Ramifications

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The affordable housing community, specifically HUD Section 202 for elderly housing, is experiencing an avoidable crisis. This crisis originates from the expanded scope of service and responsibility placed upon affordable housing organizations by the U.S. Department of Housing and Urban Development (HUD). HUD Section 202 for elderly subsidized housing specifically states that the program provides options to allow seniors to age in their community by providing independent elderly living in an environment that offers support for community-based services, such as cleaning, cooking, and transportation (Perl, 2010). Yet HUD’s most recent Minimum Property Standards for Multifamily Housing handbook states that all elderly multifamily communities must install call-for-aid systems (HUD, 1994). Therefore, the requirement for continuous call-for-aid systems, such as pull cords, forces affordable housing owners and operators to engage in the practice of nonstop-24/7-resident monitoring. In our highly litigious society, the requirement for continual resident monitoring represents a significant liability for potential future legal action. Insurance companies have taken notice of this potential liability and have responded with action. 

Many insurance companies are hesitant (or, more commonly, simply refuse) to insure elderly affordable housing communities with installed call-for-aid systems. Nationwide, Cincinnati, State Auto, Liberty Mutual, Acuity, Auto Owners, EMC, Grand River, Travelers, Hartford, and Chubb cited heightened risks with call-for-aid systems and will not write insurance to cover any affordable housing elderly communities with installed pull cords. With limited access to insurance, affordable housing communities have no ability to negotiate insurance premiums and are forced to pay significantly higher premiums with high deductibles. Some affordable housing community owners and operators reported premium increases of 25-75% due to the presence of pull cords. In addition to the threat of higher insurance costs, there is a real possibility that more insurers will leave this marketplace and there won’t be any insurers willing to underwrite these residential properties. A lack of insurance forces these elderly affordable housing communities to terminate operations.

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This report was researched and authored by Jeffrey G. Robert, Ph.D., a Collegiate Assistant Professor of Real Estate in the Blackwood Department of Real Estate in the Pamplin College of Business at Virginia Tech.  Funding for this research was provided by Scott Insurance’s Affordable Housing Practice.